**Supreme Court Upholds Penalty on Reliance Industries for Delayed Disclosure**
The Supreme Court has dismissed Reliance Industries Ltd’s (RIL) appeal against a Securities Appellate Tribunal (SAT) ruling that confirmed a ₹30-lakh penalty imposed on two of its compliance officers. This penalty was related to the delayed disclosure of the ₹43,574-crore investment deal with Facebook in 2020. The bench, led by Chief Justice Surya Kant and Justice Joymalya Bagchi, chose not to intervene, stating that the decision was based on factual findings and did not present any significant legal questions.
On June 20, 2022, the Securities and Exchange Board of India (Sebi) penalized RIL’s compliance officers, Savithri Parekh and K. Sethuraman, for allegedly breaching the SEBI (Prohibition of Insider Trading) Regulations, 2015. The regulator determined that RIL failed to promptly disclose unpublished price-sensitive information (UPSI) regarding Facebook’s investment negotiations with Jio Platforms, especially after international media reported on the matter in March 2020.
During the proceedings, RIL’s senior counsel Ritin Rai argued that there were no allegations of insider trading and that the transaction was bound by a strict confidentiality agreement. He contended that RIL could not unilaterally breach these terms and questioned the expectation to confirm or deny speculative media reports while under legal obligations to maintain confidentiality.
However, Chief Justice Surya Kant emphasized that once information about such a significant investment became public, RIL had a duty to clarify its accuracy. He remarked that the company was in the best position to inform the public about the validity of the information, especially given the potential market reactions to such news.
The negotiations between Facebook and RIL had advanced significantly by late 2019, culminating in a non-binding term sheet on March 4, 2020, followed by due diligence and a binding agreement signed on April 21, 2020. RIL officially announced the ₹43,574-crore investment on April 22. Sebi noted that after reports from Reuters, Financial Times, and other outlets on March 24, 2020, indicating Facebook was nearing a 10% stake acquisition, RIL’s share price surged. Sebi maintained that once such price-sensitive information was public during the UPSI period, RIL was obligated to issue a clarifying disclosure to ensure equal access to information.
RIL argued that under Regulation 30(11) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations at the time, responding to market rumors was at their discretion.
In conclusion, the Supreme Court’s decision reinforces the importance of timely disclosures in the financial markets, particularly regarding significant investments that can impact stock prices and investor decisions.
**FAQ**
**What was the outcome of Reliance Industries’ appeal regarding the penalty?**
The Supreme Court upheld the ₹30-lakh penalty on Reliance Industries’ compliance officers for the delayed disclosure of the Facebook investment deal, stating that the ruling was based on factual findings.